HT?IO<? 
•G'3? 



b"rllM?r\S^ 



a 



ctmtrs 



A ^<Ln ftr 1-k, eiLl.ef ©PtiMz. 




iefiiO(ti\ 



3)3 / C-? 



THE ORGANIZATION 

* M J J[ OF THE 

PUBLIC DEBT 



A PLAN 



rOR THE EELIEF OE THE TREASURY. 



ROBERT 'MORRIS 

■ .... .-~-..,^.j. 1- 



i'~ 






JAMES MILLEE, PUBLISHER, 

(Successor to C. S. FRANQS & CO.,) 

No. 522 BROADWAY, NEW YORK. 

1863. 



' Cf32 



PRESS OF WYNKOOP, HALLENBECK & THOMAS, 
No. 113 FcLTON Street, New York. 



Groundless alarms about the debt. Absurdity of the cry of insolvency. 
The debt assumed at its highest possible amount. Scale of liquida- 
Hon. Means of payment. Ample resources. False theory of the 
sub-treasury exploded. Errors of negotiation. A financial syllo- 
gism. The practical repudiation of our national economy. Nature 
and use of a public debt. A milliner^ s assortment of stocks. The 
organization of the debt. Annuities. An auxiliary currency. 
The sale of opinions. Dangers of the banking scheme. Gold the 
inevitable measure. Means of resumption of specie payments. 
The speculation in gold, and the speculators. Summary of measures. 
The two sides of the account. ^ 

The nation is o]3pressed and alarmed by apprehensions of a 
debt of some thousands of millions of dollars. It is affected by 
the cry, and by fears, of insolvency. It can feel but little con- 
fidence in its fiscal managers who manifest no capacity to de- 
vise measures that do not threaten positive evils, while prom- 
ising doubtful relief. Such is our present condition. 

It is the object of the writer to show that, whatever may be 
the debt of the nation, alarm and apprehension concerning it 
are without just grounds ; that the bruited insolvency which 
disturbs our fancy is utterly a fiction ; that the helplessness of 
the treasury management does not arise from any insuperable 
difficulty in our circumstances, but from a false theory of the 
debt entertained by those to whom it is intrusted ; and that 
the evils with w^hich they threaten the country, by fastening 
upon it an irredeemable paper currency, are far more serious 
in their character and scope than those which they expect to 
remove. 

If we assume, as a basis for our illustration, that the possi- 
ble debt of the nation will be four thousand millions of dollars, 
we shall, without doubt, cover all its extreme perils. It is to 
be considered with reference to the ability of the country to 
carry and pay it. 

Regarded in a mass, four thousand millions of dollars is a 



veiy formidable sum. But if we apply to it tlie principles of 
an organized funding system, it begins at once to lose its fright- 
ful magnitude, and takes the shape of a manageable obligation. 
The first principle or rule of a national debt is, that its liqui- 
dation must be distributed over a term of years. If we assign 
fifty years as the term for paying a debt of four thousand mil- 
lions of dollars, allowing also sixty millions a year for the ordi- 
nary expenses of the Government, it w^ould be accomplished by 
raising three hundred and fifty millions a year for five years, and 
three hundred millions annually for the rest of the term. 

By appropriating three hundred and fifty millions annually, 
compounding the decrease of interest by the diminishing prin- 
cipal w^ith the liquidating capital, the debt would be extin- 
guished in twenty-nine 3^ears. 

On the plan of paying off one hundred millions a year until 
the whole is extinguished, the sum of four hundred millions 
would be required the first year. In ten years the requisition 
w^ould be reduced to three hundred and forty millions ; in ten 
more, to one hundred and eighty millions ; in ten more, to 
one hundred and twenty millions^ and in nine more, the whole 
would be redeemed ; that is, in thirty-nine 3^ears. 

It is not, then, with the great mass of four thousand millions 
that \Ye have to deal, but only w^ith the annual installment. A 
merchant, who has notes to pay to the aggregate of half a 
million in a term of six months, does not distress his imagina- 
tion with the thought that it is impossible for him to discharge 
the whole sum in one day. 

Four hundred millions a year is the highest amount de- 
manded by either of the foregoing scales, and that for one year 
only. The requisition decreases each year by the decrease of 
the principal. It cannot be doubted that the national resources 
are more than equal to this requirement. 

A debt of three thousand millions of dollars would be ex- 
tinguished by three hundred and fifty millions a year, in a term 
of about fifteen years. 

Three hundred millions a year would liquidate the same 



amount in twenty-three years. In ten years it would reduce 
the debt from three thousand to twenty-two hundred miUions, 
when an annual appropriation of two hundred millions of 
dollars would work its gradual extinction. 

In all the foregoing calculations, the sum of sixty millions 
annually is included for the ordinary expenses of the Govern- 
ment, the object being to show the entire burden that the 
country would have to carry. 

From the distribution of the debt over a considerable num- 
ber of years, results its stability of value, and its consequent 
attraction of capital. There can, then, be no difficulty in collect- 
ing the sum necessary to pay its annual interest, and to con- 
tinue a gradual liquidation ; whereas, if the redemption should 
be forecast on a short period, it would prove detrimental to 
the general economy, and, perhaps, impossible of execution. 

In the report of the Secretary of the Treasury for 1861, 
is tliis passage : " Perpetuity of debt is not of American origin ;" 
and from time to time we have heard the dogma put forth, 
that one generation has no right to contract a debt for a suc- 
ceeding generation to pay. It is as reasonable to assert that a 
man has no right to devise an encumbered estate to his 
children. The national debt now accruing is more for the 
benefit of the future, than for the present. If the present, in 
addition to the loss of life, and its terrific weight of physical 
suffering, should be taxed with the expenses of the war, the 
nation must cease to exist. It is enough if it pay the inter- 
est. Such dogmas, which mean nothing to the purpose, 
are worthy of demagogues — not of statesmen, who should 
have some knowledge of the rudiments, at least, of political 
economy. The simple duty of the Treasury Department of 
the Government is to organize the national debt on sound 
commercial principles, and it will then take care of itself. 

Are the resources of the country equal to the annual pay- 
ment of three hundred and fifty millions of dollars a year for five 
years, and of three hundred millions for the following forty-five 
years? This is the sole question with w^hich we have to do. 



We shall base no calculations whatever on the success of 
treason. It is the united labor of the whole nation, and the 
entire body of its vast economy, directed to one point, that we 
look to for the grand result. 

On the best official data extant, the annual production o^ the 
United States now reaches four thousand millions of dollars. 
During a period of fifty years, we shall, therefore, have a gross 
product of two hundred thousand millions to glean from, for 
the liquidation of a debt of four thousand millions. This is 
leaving out of view all increase of the product. If we assume 
that the population of the country will average fifty millions 
for the term named, and apply the rule of proportions to it, we 
shall have an average annual product of little less than seven 
thousand millions, giving a gross of three hundred and fifty 
thousand millions wherefrom to glean the liquidation of but four 
thousand millions of dollars. There is nothing fallacious in 
these estimates. Population increases by known laws, and the 
production of the country must keep pace with it. 

Again : it is computed on official data that the net earnings 
of the people of the United States amount to four hundred mil- 
lions of dollars a year. In the term of fifty years, the gross of 
net earnings, without the increase, will then be twenty thousand 
millions of dollars : with the increase, it will reach thirty-four 
thousand millions. Can a doubt be entertained that the country 
will be able, with such means, to carry and to liquidate any debt 
that can possibly accrue during the insurrection ? 

It almost baffles our belief to contemplate these prodigious 
results. They seem to defy possibility. But they are perfectly 
reasonable, when considered in relation to our extensive domain, 
the wealth of which waits only for population to develop it. A 
smaller area in Europe already gives a greater aggregate pro- 
duct, and justifies the conclusions which we foreshadow. 

This is not Atlas with the world on his shoulders, but Atlas 
with a billiard ball in his hand. 

Shall it be said that we draw an exaggerated picture of our 
resources — that it is only a vague outline, and not practical to 



the positive arithmetic of our public debt. Let us, then, look 
at some of its more material ground-work. 

The real and personal property of the United States is valued 
at sixteen thousand millions of dollars. The portion of the public 
lands actually surveyed, and ready for sale, on the 30th of Sep- 
tember, 1SG2, embraced over one hundred and thirty-five mil- 
lions of acres. 

The number of acres of unimproved land in the ten rebel 
states in 1850, v^as near four hundred and fifty-five millions, 
three hundred and sixty-three millions of which were uninclosed 
in farms, and it may be presumed unoccupied, and therefore 
useless to any human beings. The confiscation of the latter at 
least, to go towards the expenses of the war, would be no more 
than an act of righteous justice, injuring nobody. The unim- 
proved and uninclosed lands in the territories, in 1S50, embraced 
over twelve hundred millions of acres. The census reports are 
deficient in the classification of Government lands, but we are 
not far from the truth in estimating them at one thousand mil- 
lions of acres. Including the wild lands of the Slave States, w^e 
have therefore a public domain of about fifteen hundred mil- 
lions of acres to lay at the feet of the national creditors as security 
for their loans. Excepting Russia, all Europe, including Great 
Britain, contains fewer than one thousand millions of acres. 
Our great unmortgaged farm, is therefore equal to once and a 
half of that area. 

The Free Homestead Bill will make these lands more profitable 
to the treasury, by occupancy and production, than they would 
be by sale to speculators. Their mineral wealth is reserved 
from sale, and will constitute a source of incalculable income. 
To these specifications, we may add the revenue on foreio-u 
goods, taxes, tolls, and franchises, the basis of which is every 
day widening with the spread of population. 

What can be more groundless than apprehensions of national 
insolvency, in view of this unequaled display of resources, to the 
present hour scarcely touched by the tax-gatherer's hand? And 
what more surprising than the fact, that so vast an estate should 



be reduced, in the space of a few months, from a condition of 
the highest prosperity to such helpless inefficiency and embarrass- 
ment, as give color to those apprehensions? 

Another question, yet more extraordinary and pointing with 
ghost-like warning into the future, forces itself on our minds. 
Is it possible that there is no escape from the disorder of the 
public finances, but to rush blindly upon the last resort of revo- 
lutionary and exhausted states — an irredeemable paper currency? 
Yet, such is the extreme measure now contemplated by Con- 
gress, in conformity with the recommendation of the Secretary 
of the Treasury ! 

A false theory of currency and debt, emanating from the 
bed of party politics, appears in the outset to have dictated the 
fiscal policy of the Government. That is, the " hard money," 
independent sub-treasury system. It w^as never justified by the 
principles of economy ; and the highest merit it can claim is, that 
it has answered a small purpose, in an imperfect manner, in a 
time of peace, when no exigencies pressed upon it. The first 
breath of war exposed its inadequacy, and it has fallen prostrate 
by the first blow of the club of paper money. The consequence 
is, that from ^' hard money," and the sequestration of the public 
funds from all alliance with the capital of commerce, the Govern- 
ment now swings to the opposite extreme of an irredeemable 
paper currency, and to the most intimate association of the 
National Treasury with the commercial system. 

It was high time for the absurd theory of financial independ- 
ence to be exploded, in view of the common experience of the 
world in fiscal affairs, which clearly proves that the more closely 
a Government unites its functions with the general interests of 
the people, the more tenacious are its bonds of unity, and the 
more sure its dependence for aid in a season of adversity. But 
the Treasury sequestration plan was no more than a corollary of 
the " hard money" dogma, which rests on the theory, repudiated 
by all enlightened economists, that nothing but gold is capital, 
ignoring the organized and established property of a country, of 
which gold is the subordinate agent and not the superior. 



It was the first grand error of the Honorable Secretary of 
the Treasury, when he entered the market to negotiate for the 
capital of the war, to base everything on the single proposition — 
coin or the issue of paper money. The first loan of one hun- 
dred and fifty millions of dollars, was paid by the takers in coin ; 
but it was a suicidal process, reducing the commercial system 
from a proportion of fifty per cent, of specie to liabilities, down 
to twenty per cent. And no sooner w^as it knowm that the 
Secretary required a second loan, of one hundred and eighty mil- 
lions of dollars, than the golden goose was killed. " Careful 
inquiries," he says, in his report of 1SG2, satisfied him, that to 
obtain one hundred and eighty millions in coin, w^ould require 
an issue of two hundred and eighty-five millions of bonds ; or a 
"shave" of about sixty per cent, on the face of the transaction. 

" There remained but one other possible w^ay of raising the 
money," says the Honorable Secretary, " and that was to 
receive in payment of loans the notes or credits of the banks in 
suspension." This was not " compatible w^ith his ideas of pub- 
lic duty." He adds, " No other mode of providing with any 
tolerable degree of promptitude for the w^ants of the army and 
navy, etc., seemed likely to effect the object with so little pub- 
lic inconvenience, and so considerable public advantage, as tlie 
issue of United States notes adapted to circulation as money, 
and available, therefore, immediately, in Government payments." 

The syllogism is short, and to the point : 

1. Coin, or bank notes and credits. 

2. Bank notes and credits, or paper money. 

3. Therefore, coin or paper money. 

Had the theory of the Honorable Secretary permitted him 
to pause and reflect whether there is not, betw^een the two 
extremes of his syllogism, another expedient, not involving the 
latter, or, had his acquaintance with, commercial methods been 
of a more practical kind, he might have avoided the headlong 
plunge wdiicli he has made into the " bottomless abyss" of paper 
money. He might have discovered in the common system of 
mercantile accounts, a plan by which all the negotiations and 



10 

disbursements of the Government could be carried on with per- 
fect regularity and efficiency, on the basis of the national capital 
and resources, consisting, as we have seen, of more ample prop- 
erty and guaranties than can be offered by any other country on 
the globe. He had only to drop from his nose the spectacles of 
blind, political partisanship, manufactured in the year 1846, and 
now repudiated by their maker,* and to look at affairs as a 
merchant does, w^hose ships are constantly arriving from every 
part of the world with rich freights, and who, proportionably 
with his means, conducts a business infinitely larger than that 
of the Treasury of the United States. But w^ith an estate at his 
back, yielding four thousand millions of product every year, 
with steady increase, and with a virgin domain more valuable 
than all the wealth of Great Britain, that carries successfully, a 
debt nearly ten times as large as was that of the United States in 
December last, the Honorable Secretary of the Treasury could 
see nothing but his little base of fifty millions of coin, melting 
down to twenty millions in five months, and slipping away from 
under his feet like a treacherous quicksand! Instead of de- 
vising means to organize a permanent funding system, known 
to be the only possible resource for constituting a national 
credit, he sinks down into utter helplessness, because he cannot 
build an inverted pyramid on " hard money !" 

This w^as no less than a monstrous repudiation of our vast 
national economy, and the consequent destruction of the pres- 
tige of the public credit. 

The wTiter is not a paper-money theorist, nor is he indiffer- 
ent to the necessity of preserving a sufficient basis of " hard 
money" to answer all the functions of liquidation in our com- 
mercial and fiscal aftairs. He is simply, as fiiv as his knowledge 
goes, an economist. It is because he believes there is a cure 
for the present disorder in our public finances, without a resort 
to the unlimited issue of paper money, that he so freely denounces 

« Robert J. Walker, the author of the Sub-treasury bill, has repudiated it in 
the Continental Magazine, but desires it to be understood that he has not changed 
any of his opinions, etc. 






IL 

that expedient. As the only proposition before the country, it 
demands a thorough scrutiny. It may prove in the end that 
the banking scheme of the Honorable Secretary is more at fault 
in its peculiar shape, than in its normal idea. Such, at the 
moment is the growing belief of the writer. Nor does he esteem 
it by any means impossible that its leading principle may be 
reconciled at the same time with the public wants and the 
public interests. 

One of the first things necessary to be understood, is the 
nature of a public debt. It is itself the constitution of a new 
kind of currency. When well organized, its representative 
bond or stock possesses all the properties of a bank or treasury 
note. In fact, it is money, differing from bank issues onl}^ in 
the feature of its bearing interest. There is nothing new in 
this proposition. Hamilton, in his first report on the public 
credit, in the year 1790, referred to it as " a well-known fact, 
that, in countries in which the national debt is properly funded, 
and an object of established confidence, it answers most of 
the purposes of money." It encourages the extension of 
trade, agriculture, and manufactures, because it furnishes 
capital. And it lowers the rate of interest, because the holder 
is not tempted to enter the market to buy other interest-bearing 
securities. "But these good effects of a public debt," he adds, 
" are only to be looked for when, by being well funded, it has 
acquired an adequate and stable value ; till then it has rather a 
contrary tendency. The fluctuation and insecurity incident to 
it, in an unfunded state, render it a mere commodity, and a 
rather precarious one." 

It is the want of organization in our public debt that is at 
the bottom of our financial embarrassments. The funded por- 
tion of it consists of at least twenty difterent kinds of stock, 
or evidences of debt, each of which possesses some peculiarity 
that makes its market value different from all the others. They 
are as follows : 

Six per cent, stocks of 1 8G7 

Six per cent, stocks of 1868 



12 

Six per cent, coupon stocks of 1 SGS 

Six per cent, registered stocks of 1 SSI 

Six per cent, coupon stocks of 1S51 

Five per cent, registered stocks of. . . . 20 years. 

Five per cent, conpon stocks 20 years. 

Oregon war stocks of IBS 1 

Oregon half-year war stocks of ISSl 

Five per cent, coupon stocks of 1SG5 

Five per cent, registered stocks of 1 S71 

Five per cent, coupon stocks of 1871 

Five per cent, registered stocks of 1S74 

Five per cent, coupon stocks of 1S74 

Seven-thirty treasury notes, 3 years, small. 
Ditto ofSlOOO, do. 

Ditto of larger amounts, do. 

Six per cent, two years' notes. 
Six per cent, one 3^ear's certificates. 
Demand treasury notes. 
This remarkable list of the public secnrities is comparable 
only to the " extensive assortment" of ribbons in a millinery shop. 
Between many of them there is hardly a shade of difference to 
the inexperienced eye. Not only is it impossible for such 
evidences of the public debt to answer the purpose of money, 
but it is impossible for any one safely to deal in them for invest- 
ment without making an arduous study of all the terms of com- 
petition between them ; and even then, nothing but perpetual 
vigilance would protect him from loss by depreciation, or by fail- 
ure to take advantage of the market for a sale. The " outside" 
public are liable to be cheated every time they venture to 
invest in them. In short, it is a business by itself to study the 
list, and to keep up with the innumerable daily fluctuations of 
price to which the different stocks are subject. The general 
consequence is, that but few people, comparatively, invest in 
them ; and the price is, doubtless, much lower than it would be 
in a wider market. The small borrowings of the Government 
have heretofore made it of little consequence to give to its 



13 

bonds a uniformity that would favor their use as money. But 
now it is of the first importance to do this. The body of the 
public debt is likely to consist of at least three thousand 
millions, and every precaution should be adopted to encourage 
its distribution among the people. 

The method for doing this is perfectly simple. The Gov- 
ernment should give notice that all the different kinds of 
stock and paper now afloat will be convertible into six per 
cent, annuities,* and that it will issue none hereafter in any 
other shape, or at any other rate of interest. It is import- 
ant that there be no different rates, to make confusion or 
competition. One quotation flashes over the telegraph and 
answers for the whole country. The lower denominations 
might be in hundreds and fifties, with tables of interest on the 
back. These would everywhere be adopted as money, and 
quickly drive out of circulation all bank issues of the same 
denominations. They would begin at once to absorb the 
savings of the working classes, the money of estates, surplus 
incomes, and funds in trust. An Act of Congress formally and 
specifically devoting the product of all the national resources, 
including the mines, in guarantee of these annuities, would 
place them on a par, in the markets of the w^orld, with the best 
securities of other nations. 

We have a striking example of the success of a measure of 
this kind, in giving character to a debt, and restoring the credit 
of a nation. The public debt of France, during the revolution, 
was in a state of disorder similar to that of the United States 
at the present time, though much worse. Yet, without a tithe 
of our domain and resources, from the first moment that it 
was made to assume a character of uniformity, it began to grow 
in favor with capitalists, and to be understood by the people, 

* ""Annuities" is the English name for stocks bearing an annual interest, but 
differing from them, in not being redeemable at a certain time, but at the pleasure 
or ability of the Government, It would be a better term for the national securi- 
ites, as a clear distinction from the innumerable State, county, and company 
" stocks" with which the country is flooded. 



14 

who then respected it. The close parallel of the case to our 
own, gives interest to the following extract from Thiers : 

*' What was to be done in such a conjuncture ? Resort to 
a loan, or issue assignats? To borrow would be impossible. 
To issue assignats w^ould be easy enough ; for this, nothing 
more w^as required than the national printing office ! The 
first and most indispensable measure was to establish order 
in the debt, and to prevent its being divided into contracts 
of all forms and of all periods, and which, by their difference of 
oi-igin and nature gave rise to a dangerous and counter revolu- 
tionary stock-jobbing. The knowledge of these old titles, their 
verification, and their classification, required a particular study, 
and occasioned a frightful complication in the accounts. There 
was the constituted debt, the debt demandable at a fixed period, 
the demandable debt proceeding from the liquidation, and in 
this manner the exchequer was daily liable to demands, and 
obliged to procure funds for the payment of sums thus falling 
due." 



" The debt must be made uniform and republicanized," 
said Cambon, who devised the plan, copied in some respects 
from the English. It was adopted entire, and went into imme- 
diate execution. The result was, that after a short time, loans 
in the regular form were found practicable, and the circulation 
of the assignats, which had reached nearly five thousand 
millions, was thereby reduced. 

We have shown that the security of our national debt is so 
solid, that no uneasiness could arise in the public mind, w^ith 
the annuities not being redeemable at a fixed time. But this 
feature would be highly advantageous to the Government, 
which, by constituting a sinking-fund for this purpose, might 
buy them in when the market price would justify it, as a 
measure of economy. 

A knowledge on the part of the public that the national 
debt is limited to a certain amount, would have an influence on 
the price of the annuities ; and this might be indicated by the 
consecutive numbering of the denominations, from one upward. 



15 

The sum of the highest numbers of the several denominations 
issued would indicate the whole debt ; and the accuracy of 
the footing could ahyays be tested by appH cation to the 
Treasury Department. Any fraudulent duplication of the num- 
bers would be detected on their presentation for the periodical 
interest. The strict observance of these clerical particulars 
would be an assurance to the public of the general exactness of 
business in the main office, which is not a matter of small con- 
sideration, especially with wealthy capitalists and institutions 
holding large investments in the debt. 

The economy of maintaining the documents of the debt in 
good condition is a point that ought not to be overlooked. The 
constant renewal necessary to a small currency of hundreds of 
millions of dollars will be a heavy tax on the banking scheme of 
the Honorable Secretary of the .Treasury. It will require 
expensive machinery, and a prodigious array of clerks. The 
defaced and tattered condition of the fractional post currency is 
such already as to call for the process of renewal. On the pro- 
posed plan of annuities, the greater part of this expense and 
labor would be avoided. 

The use of the annuities as money would naturally be intro- 
duced through the disbursements. They would prove much 
preferable to the present system of issuing certificates of indebt- 
edness, running one or two years, which are destined, at 
maturity, to return in masses on the treasury, and to add to 
the complication of the accounts. By giving notice that all 
contracts for Government work and supplies will hereafter be 
paid in annuities, the difficulty of getting money for these dis- 
bursements is avoided. There could be no injustice in this, 
because the market-price of the annuities would be taken to 
regulate the price of labor and commodities. Competition is 
the unfailing adjuster of inequalities in all markets ; and the 
Government, as well as the contractor or merchant, would be 
protected by it. 

Let a case be supposed. The Government wishes to pur- 
chase twenty thousand barrels of flour, when the market is 



16 

barely sustaining the annuities at par, and a further issue of 
them will be likely to depress their price. The merchant 
ascertains what he can dispose of the annuities for, and if 
obliged to sell them below par, adds enough to the price of his 
flour to compensate for the loss. So of every article. If the 
profit paid by the Government is greater than by purchases on 
commercial account, the flour merchants will soon discover it, 
and compete for sales, when the price will fall. 

A large portion of the disbursements of the Government, as 
wages, salaries, and so forth, could not be made in annuities. It 
would, therefore, be necessary to have an auxiliary issue of 
Treasury notes, not bearing interest, but convertible into annu- 
ities. These should not be put out for circulation as money, 
but merely as an instrument for the organization of the debt. 
They would, nevertheless, be used as money. If they were found 
to be in excess, they would be subject to discount in the mar- 
ket. But in proportion as they would fall below par, they 
would tempt purchasers for investment. They must, however, 
always be within a shade of the price of annuities — at little 
greater discount, in fact, than would pay for the time and 
trouble of getting them converted. This auxiliary currency 
would soon find its limitation of volume, and begin to move in 
a circle as bank notes do, repeating their service as often as paid 
out. The ordinary use of bank circulation shows that a volume 
of one hundred thousand dollars might answer the purpose of 
funding millions of annuities. In this wa}^ all the paper cur- 
rency issued by the Government would be the servant, and not, 
.as in the banking scheme of the Honorable Secretary of the 
Treasury, the master of the Government. 

With specie payments^re-established, the auxiliary Treasury 
currency alone might be made a perfect vehicle for the organ- 
ization of the public debt. The convenience of trade would 
tend to keep it at par, and thus compete in favor of the Govern- 
ment against the brokers who might have orders to buy it be- 
low par for conversion. But if it should fall to eighty cents on 
the dollar, there need be no cause for alarm to the Treasury 



17 

Department ; for the apparent loss falls on those through whose 
hands it passes in circulation, and is so distributed that proba- 
bly no one holder loses more than one per cent, and that he 
provides for in his terms of dealing, as in the case of the annui- 
ties. As soon as the depression of the notes would reach a point 
at which their funding would pay the current rate of interest 
in the market and a small commission, they would be bought 
up for conversion. By this process the Government would be 
relieved from the odium of issuing irredeemable paper money. 
In fact, it would issue no money at all, as such, but only tokens 
of the debt, redeemable in annuities, according to engagement. 
Nothing is more remarkable than the apparent acquiescence 
of financiers, politicians, statesmen, editors, merchants, and men 
of letters, who have heretofore held on this subject adverse 
opinions (and conscientious convictions, if we may believe them), 
in the perilous and gigantic experiment now, seemingly, about 
to be adopted by Congress, for the inauguration of a period of 
irredeemable paper currency on a scale that threatens to cast 
into the shade the folly of other nations in the same course ; 
and, likewise, in all probability, their consequent sufferings and 
losses. It is, perhaps, partly to be accounted for by the fact 
that so many of them are enlisted in the profitable speculations 
of the day , or, are reaping advantages from them in one shape 
or another, and fear an interruption of their good fortune. 
Doubtless, Grovernment contracts are yielding to some of them 
a compensation for the sacrifice of their long-cherished opinions. 
We have sufficient evidence before us to warrant the belief 
that if all selfish incentives were removed, their eyes would 
again become anointed with the salve of their ancient wisdom, 
and their voices again be heard in praise of " hard money." 

But a manifest lack of genuineness accompanies the seeming 
acquiescence with which the currency scheme is received. It 
is not really approved, but submitted to, because, as the Hon- 
orable Secretary of the Treasury tells us in his late report, 
"there is no other mode of providing for the wants of the Gov- 
ernment." It is believed to be pregnant with calamity, but 
2 



18 

necessary to avert greater calamity. Whether such a state of 
opinion is sufficient to justify the submergence of our vast 
economy in a sea of irredeemable paper money, let the members 
of Congress gravely reflect. 

A serious objection to the scheme is, that it ties the credit 
of the whole national debt to the credit of the paper circula- 
tion. The most fatal consequences may be apprehended from 
this circumstance. Compared with gold, the Treasury circula- 
tion already stands at a discount of sixty per cent., for which 
no earthly cause can be assigned but its present bulk, and pro- 
spective increase. It is a new kind of logic, to assume that when 
an article is cheap, because of its abundance, it will become 
dear by creating a still greater abundance of it. 

Another objection is, that it is revolutionary in its character, 
because adapted to increase the political distractions of the 
North, and to bring on a conflict between Federal and State 
legislation. Lastly, it is idle to suppose that three hundred 
millions of stock, taken up for banking purposes, can sensibly 
affect the price or credit of the whole mass of the debt, since 
there will be no continuous demand beyond that amount. It 
will be much more likely to have an opposite influence, as the 
substantial measure which fastens upon the country the policy 
of a voluminous anti-specie basis currency. 

The inevitable result of increasing the treasury circulation, 
will be to carry up the currency price of gold in the proportion 
of such increase. There is not a single example of a contrary 
effect on record. 

The theory of the Honorable Secretary of the Treasury, that 
gold is " demonetized," is essentially false, in spite of its specious- 
ness. It cannot be "demonetized" while it continues to be the 
measure of every other influential market in the world, but will 
apply itself to our affairs, in their entire body, as it has never 
ceased to do, through the foreign exchange. And, if Congress 
shall commit the great fault of conjoining the whole credit 
of the nation with the credit of an indefinitely expansive cur- 
rency, there is much reason to fear that the country will have 
leisure for repentance. 



19 

What was it that "demonetized" gold? Was it not the 
absurd theory of the Secretary of the Treasury, that led him to 
insist on constituting with it the whole capital of the w^ar, 
instead of allowing it to perform its true function of a repeating 
agent, for the proper organization of the public debt, and the 
maintenance of the national credit ? And it is now the same 
false theory, applied to paper currency, which leads him to the 
vain attempt to constitute the capital of the war by the gross 
bulk of its emission. It is the prospect of necessary unlimited 
expansion in the future, that makes the Samson of gold shake the 
pillars of our national treasury. 

Gold has been aptly termed " the blood of commerce." The 
circulation of the human body is a perfect simile to it. The 
heart pays out by the arteries, and receiving back by the nu- 
merous small veins. The vitalizing fluid visits every extremity of 
the system, and the very condition of life is its constant repeti- 
tion of the same service. If, for any cause, it becomes clogged 
in its passage, and cannot return to the heart, death follows. So 
with gold, not only in each separate market of the world, but in 
its commercial system as a whole. Our financial doctor 
repudiates the theory of circulation and repeated service, insist- 
ing on a fresh supply at every time. With gold, that supply 
was impossible ; but with paper money, it is the easiest possible 
expedient for men who know not what else to do. 

Differing, as we may, on every other point of our financial 
management, there is yet one on which all agree ; and that is, 
that no measure should be neglected that can in any way favor 
a return to specie payments. Happily, the country is not left 
without the chief resources by which this desirable end may be 
obtained, viz., a large stock of gold in hand, uninterrupted com- 
munication with the producing mines of California, a prosperous 
agriculture, and a reduced scale of foreign imports. The most 
auspicious of these circumstances, in the immediate use that 
it may be made to serve, is the reservation of at least fifty 
millions of the precious metal in the bank vaults of our chief cities. 
But for this fortunate accident, our national credit would 



20 

have trailed in the dust long since, and the nerves of the war had 
been broken. No example is more honorable than that of the 
stockholders and managers of the banks, in holding this pre- 
cious deposit, not for selfish or speculative gains, but as a sacred 
trust, resisting all the temptations of the market, that it may 
return again in due season, and play an eftectual part in the re- 
establishment of the public credit. 

The speculation in gold has reached a point at which prompt 
legislative interference is demanded in the name of the national 
credit, and, by consequence, of the national unity. The failure 
of Congress through two sessions to pass a general bankrupt 
law, has left commerce prostrate where the rebellion struck it 
down. The foreign commercial correspondence has accordingly 
dwindled, until it is now confined chiefly to foreign merchants 
and bankers, many of whom sympathize openly and actively 
with the insurrection. They are the correspondents of the foreign 
manufacturing interest, and are freely giving money and moral 
support to political factions and journals which are laboring to 
sow dissension in the loyal states, and to neutralize the efforts of 
the Government to restore the unity of the nation. They are, in 
fact, doing no less than maintaining an army of traitors and cow- 
ards in the North, while our true and brave men are shedding 
their blood in the field. The state of public feeling in Europe 
has, doubtless, been affected unfavorably towards us by their 
correspondence. Since our commercial relations ceased to be 
reciprocal, they would naturally become hostile, because our 
blockade of the southern ports has stopped employment in their 
factories and interfered with their profits. The small number 
of these conspirators has enabled them to combine, in a perfect 
understanding, to assist the rebels by injuring the national credit. 
They hold exclusive power over the foreign exchange, and, 
through it, govern the gold market. By nominal quotations, 
twenty per cent, above the price of gold, when the difference of 
par is but nine per cent., they compel the shipment of gold. 

A similar effort was made to injure the public credit of France 
durino' the revolution. Letters were found, written in Enghsli, 



21 

to bankers in Paris, one of which contained the following 
instructions : " Make the exchange rise to two hundred livres 
for one pound sterling. The assignats must be discredited as 
much as possible, and all those which have not the royal effigy 
must be refused. Make the price of all articles of consumption 
rise too. Give orders to all your merchants to buy up all the 
articles of first necessity." 

Under these circumstances, the obvious remedy is to lay an 
export duty on gold of not less than twenty per cent. The 
effect of this would be to arrest the speculation that directly 
assails the public credit, and to open the way for a speedy 
resumption of specie payments, for which we do not lack means, 
but measures only. These are as follow : 

1. An export duty of twenty per cent, on gold. 

2. The passage of a national bankrupt law, to revive general 
commerce. 

3. The consolidation of the public debt in annuities bearing 
a uniform rate of interest. 

4. The use of the annuities in all Government disbursements, 
or of auxiliary treasury notes convertible into annuities. 

5. The specific devotion, by act of Congress, of all the 
national resources, to the payment of the interest on the public 
debt, and its final redemption. 

6. The abolition of the contract system of purchasing 
supplies and commodities, and their purchase in open market, 
by which it is computed there will be a saving of twenty-five 
per cent in their cost. 

Since the foregoing pages were in type, we have intelli- 
gence that the banking scheme of the Secretary of the Treasury 
has passed the House of Representatives. The principal object 
of the writer will not fail, however, if the public attention be 
drawn to the only measure by which the credit of the Govern- 
ment can be restored, viz., by a permanent funding system, and 
not by occasional expedients and financial tricks. 



22 





o 




o 








o 










o 


1 




o 




o 








o 










o 


s . 




o 




c 










o 










o^ 


O CO 




























^ ^ 




o 




c; 










o" 










o" 


"^ ci 




o 




o 










o 










o 






o 




c 










o 










o^ 


2 'o 




o~ 


iO 


"- 








o" 










io~ 


.S^ 




o 




i:- 








iO 










(M 


C «+_! 




o 


- 


00^ 








co" 










O 1 


i'^ 




CO 
























CO 






■©& 






















€«■ 


'3 


a gross product of 
fifty thousand mil- 
term of fifty years 

domain of fifteen 
acres, at $1.25 per 






its of said domain, 

silver, quicksilver, 

coal, &c., Avorth 


it 


1 

.s 

a 
c 

p, 
o 


Q> a 










1- 
11 






en 

as 

1—1 iVh 


i^ o 
S 


o 


CO 
o 


c3 


a 
o 

2 




ce left after 
X hundred an 




- P,^ o 


3g 






c3 o 


o 


c3 
O 

S3 


o 


o 
O 
o 


s 




G ^ o 


;- 
c 




III 


a 

2 






§2 

n 




^*-- 


>." 


c: 




>.« 


o 


p 


s-^ 


>> 


4-i 


^3 


o 


t>><» 




W 


^r^ 






tt 








w 








pq 


















o 












o 


















^ 












o 


















o 












o_ 








~ 










cT 




























o 












o 






c 












o 












o 


































c 












»Q 












lO 






c 












cq 












CM 






c 












«o 












CO 


































^ 












IC 












o 






^©- 










cc 












CO 






























«©■ 






ri S 


M i 


fc 


aa 


^ 




















sS 




'5 


-t^ 


















9i 




C ^ 


C 
c 
c 


.2 




















Q 


c: o 


^ 


(— 


r:3 
























c 

I 

>< 


^ C 


o 

o 

1 




i 
















^^ ? 


■*^ (o 


c 




^ 




r^ 


















11 


c- 
c 


. the cap 
d proper! 
e same. 




















03 "^ <V. 


c 


G 


c ^ 




c 


















o ^ 


> 


O 


c3 ■<-> 




"c 
















H 










w 














1 



LIBRARY OF CONGRESS 



''iiiiiii'iiiiiiiiiiiiiiilillijiiiilifililiiili 

020 267 291 7 



HOT T INGFR 



